EtherDelta: Peer-To-Peer Exchange Trading

[This is a post I originally began on my blog, FreeTheAnimal, in order to signal that I would be delving into it here on Patreon far more, but I’d rather put it here as a public post, cross post it to FTA, and then go from there, in-depth, for Patrons.]

Patron John Salwin posted in the community section today and it ended up me going down rabbit holes. I’ll just touch on the culmination, though, as this is a public post and the details are always for those Patrons I’m gouging for 5 bucks a month.

So let’s go.

Securities (like stocks and bonds) and derivative instruments (bundles of things, so you don’t have to DIY) have always commonly traded, publicly, on what are called exchanges.

Exchanges are simply market makers where traders gather and the transaction costs one pays are what the exchange makes for making it easy and quick to buy or sell, depending on how close your order is to the market action. And, by getting more traders into the pool, the more likely that your trade order will be filled quickly. Many of you have exchange accounts. TD, Fidelity, and etc. You don’t have to shout from the town square anymore—or even a trading pit—to fill trades.

Filling trades. It’s the absolute and fundamental essential of the exchange business, which is wonderful on many levels.

Of course, they’re highly regulated.

Why are they highly regulated, beyond the politics and pay-to-play dynamics to create a regulatory hedge against competition?

I’ll tell you why. Because they are locked into fiat currency. It’s their raison d’etre. Somebody needs to create a market to overcome inlfation of the fiat currency. See how that works? Beyond that, they are locked into regulation, accounting, audits, taxing robbers…and all else you can think of at all the levels.

…I saw something today, then threw 20 bucks at it to test it out and it’s maybe going to be the next thing. Or, it’s sure going to disrupt that which is already disrupting, but setting up to be cozy with regulators.

What is it? It’s an open source platform for trading directly on the blockchain. It’s EtherDelta. It’s an exchange only in the barest of essentials. More properly, it’s an Etherium-based platform that facilitates your peer-to-peer crypto trades in Ehterium, ERC20-based crypto coins.

Remember, in my easy how-to, where I explained the various ways to get from fiat currency to crypto in the first place? One way is peer-to-peer. That is, you meet someone in a public place and exchange paper fiat for digital currency that they send Crypto to your wallet address while you watch and wait until confirmed.

Essentially, EtherDelta accomplishes the same thing, except you don’t have to do a post to Craig’s List. You can see it in the whole Order Book right there, and anonymously.

I’m not going to kid you. This is trading 201, not 101. Best you have some experience before getting into it. Otherwise, the “gas,” as they call it, will killya.

But you have to understand the “gas,” meaning transaction costs.

Here’s the TL;DR. Unlike a regulated exchange, EtherDelta is merely a trading interface to the raw blockchain. You don’t deposit money to them, they just keep track of your keys while using them, and you can import a key from an ETH wallet.

Your Etherium (ETH) balance is on the blockchain, forever, and your private key proves you own the coin balance. EtheriumDelta makes it such that you can trade on the blockchain itself via a smart contract, which Etherium is designed for. There are two tradeoffs.

2. As a portal only, everything it does goes to the blockchain directly and there is a transaction cost associated with all of it.

On number two, a knee-jerk reaction might be, this is crazy. I get that, and then I understood what I was really dealing with.

It made me understand what I was really dealing with, and once I understood, the epiphanies flowed, and I had to write this.

More for the Patrons to come, though this is not essential. Like I said, this is a taste of 201, and there’s no security blanket. I posted this because it’s an example of the power of blockchain. On levels, it’s a PITA, but, is relies on no authority whatsover and no authority could interfere with a transaction, reverse it, seize proceeds, or, in this application, even have a clue who did the trade.

You click one button to crate an account and you get a public and private key, which is all you need.

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I'm Richard Nikoley. Free the Animal began in 2003, and as of 2017, contains over 4,500 posts and 100,000 comments from readers. I cover a lot of ground, blogging what I wish...from health, diet, and lifestyle to philosophy, politics, social issues, and cryptocurrency. I celebrate the audacity and hubris to live by your own exclusive authority and take your own chances in life. [Read more...]

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